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STROOCK & STROOCK & LAVAN LLP JULIA B. STRICKLAND (State Bar No. 083013) STEPHEN J. NEWMAN (State Bar No. 181570) 2029 Century Park East, Suite 1800 Los Angeles, California 90067-3086 Telephone: 310-556-5800 Facsimile: 310-556-5959 [email protected] Attorneys for Defendants AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., AMERICAN EXPRESS CENTURION BANK and AMERICAN EXPRESS BANK, FSB UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA DAVID J. LEE and DANIEL R. LLOYD, individually and on behalf of all others similarly situated, Plaintiffs, v. AMERICAN EXPRESS TRAVEL RELATED SERVICES, INC., a New York corporation, AMERICAN EXPRESS CENTURION BANK, a Utah corporation, AMERICAN EXPRESS BANK, FSB, a Utah corporation, and DOES 1 through 100, inclusive, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV-07-4765 (CRB) THE HON. CHARLES R. BREYER REPLY BRIEF IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS

DATE: November 30, 2007 TIME: 10:00 a.m. PLACE: Courtroom 8 19th Floor 450 Golden Gate Ave. San Francisco, CA 94102

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TABLE OF CONTENTS Page I. INTRODUCTION AND SUMMARY OF ARGUMENT....................................... 1 II. ARGUMENT .......................................................................................................... 2 A. B. C. Plaintiffs Have Not Met Their Burden Of Showing That They Have Standing To Maintain This Action. ................................................ 2 Plaintiffs Fail To State A Claim Under the CLRA. ................................. 7 The Complaint Does Not Meet The Specificity Requirements Of Federal Rule of Civil Procedure 9(b). .................................................... 11 Plaintiffs' CLRA And Fraud Claims Against American Express Centurion Bank Are Barred By The Statute of Limitations. ................. 11

III. CONCLUSION.................................................................................................... 13

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TABLE OF AUTHORITIES Page(s) Cases Bd. of Trade of the City of Chicago v. Commodity Futures Trading Cmm'n, 704 F.2d 929 (7th Cir. 1983) ..............................................................................3 Berry v. American Express Publishing, Inc., 147 Cal. App. 4th 224, 54 Cal. Rptr. 3d 91 (2007) ..........................1, 7, 8, 9, 10 Berryman v. Merit Property Management, Inc., 152 Cal. App. 4th 1544 (2007).........................................................................10 Bowen v. First Family Fin. Servs., Inc., 233 F.3d 1331 (11th Cir. 2000) ..........................................................................3 Civil Services Employees Ins. Co. v. Superior Court, 22 Cal. 3d 362 (1978) .......................................................................................10 Daghlian v. DeVry University, Inc., 461 F. Supp. 2d 1121 (C.D. Cal. 2006)..........................................................3, 6 Edwards v. Marin Park Inc., 356 F.3d 1058 (9th Cir. 2004) ..........................................................................11 Flintkote Co. v. General Acc. Assur. Co. of Canada, 480 F. Supp. 2d 1167 (N.D. Cal. 2007)............................................................13 Hernandez v. Hilltop Financial Mortg., Inc., No. C 06-7401 SI, 2007 WL 3101250 (N.D. Cal. October 22, 2007) .......................................................................9, 10 Hitz v. First Interstate Bank, 38 Cal. App. 4th 274, 44 Cal. Rptr. 2d 890 (1995) ............................................9 Hogar v. Community Development Commission, 110 Cal. App. 4th 1288 (2003).........................................................................12 In re Ameriquest Mortgage Lending Practices Litigation, No. 05-CV-7097, 2007 WL 1202544 (N.D. Ill. April 23, 2007)....................................................................................9 In Re Late Fee And Over-Limit Fee Litigation, No. C 07-0634 SBA (N.D. Cal. Nov. 16, 2007) ................................................7 Jefferson v. Chase Home Finance LLC, 2007 WL 1302984 (N.D. Cal. May 3, 2007) ...............................................9, 10
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Lozano v. AT&T Wireless Services, Inc., Nos. 05-56466, 05-56511, 2007 WL 2728758 (9th Cir. 2007)..............3, 4, 5, 6 Mass. Mut. Life Ins. Co. v. Super. Ct., 97 Cal. App. 4th 1282 (2002) ...........................................................................12 McKell v. Washington Mutual, Inc., 142 Cal. App. 4th 1457 (2006).........................................................................10 Posern v. Prudential Secs., Inc., No. C-03-0507 SC, 2004 WL 771399 (N.D. Cal. Feb. 18, 2004) ...................................................................................3 Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984) ...........................................................................................3 Ryman v. Sears, Roebuck and Co., No. 06-35630 (9th Cir., Oct. 12, 2007) ..............................................................7 State ex rel. Metz v. CCC Information Services, Inc., 149 Cal. App. 4th 402 (2007) ...........................................................................13 Tamplenizza v. Josephthal & Co., Inc., 32 F. Supp. 2d 702 (S.D.N.Y. 1999) ..................................................................3 Television Adventure Films Corp. v. KCOP Television, Inc., 249 Cal. App. 2d 268 (1967) ............................................................................12 Walton v. Mead, No. C 03-4921 CRB, 2004 WL 2415037 (N.D. Cal. October 28, 2004) ...........................................................................11 Statutes Cal. Bus. & Prof. Code § 17200 .................................................................1, 3, 6, 7, 10 Cal. Civ. Code § 17500.................................................................................................6 Cal. Civ. Code § 1770...........................................................1, 2, 3, 7, 9, 10, 11, 12, 13 Cal. Civ. Code § 1671...................................................................................................9 Civil Code § 1761 .........................................................................................................7 Other Authorities Article III of the Constitution ...................................................................................1, 7

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Rules Fed. Rule Civ. Proc. 9(b) ............................................................................................11

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I.

INTRODUCTION AND SUMMARY OF ARGUMENT

Plaintiffs do not allege that they have ever attempted to arbitrate a dispute with American Express over their Agreements, or that they were forced to arbitrate against their will or under unfair conditions. They merely assert that someday they may want to enforce the arbitration provision, but to date they have never taken any steps to do so. Thus, Plaintiffs' alleged injury lies in the future, if at all, and cannot meet the requirements of concreteness and immediacy for Plaintiffs to have standing under Article III of the Constitution, the UCL or the CLRA, or for the fraud claim. All claims are barred for lack of standing. The CLRA claim is also barred under Berry v. American Express Publishing, Inc., 147 Cal. App. 4th 224, 54 Cal. Rptr. 3d 91 (2007). Plaintiffs' novel and unsupported notion of "credit" under the CLRA is a transparent attempt to eviscerate the Berry decision, which is the controlling case on the inapplicability of the CLRA to financial services: "money or credit." Plaintiffs posit that borrowing money on one's credit card is not credit if one pays one's monthly balance in full and thus incurs no interest. Plaintiffs are unable to cite a single case in support of this notion. Further, again without citing any relevant authority, Plaintiffs claim that a "convenience service" is a "service" under the CLRA. This unsupported attempt at circumventing Berry also fails. Moreover, Plaintiffs are unable to meet the heightened pleading requirements under the Federal Rules for averring fraud. The "misrepresentations" they allege are based on no more than flimsy legal conclusions and questionable inferences. Plaintiffs do not deny receiving the written agreements stating precisely how the cards function. They also wholly fail to state the "time, place, and specific content of the false representations" upon which Plaintiffs allegedly relied at the time they obtained their credit cards, and they equally fail to reveal the identities of the makers of the alleged misrepresentations.

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Finally, Plaintiffs fail to advance any legitimate basis to overcome the threeyear statutes of limitations that apply to their CLRA and fraud claims against Centurion Bank. If there is standing, which Plaintiffs deny, then those claims had to have accrued in 2003, when Plaintiffs received their cards and card agreements. Despite their lack of specificity about the factual basis of their claims, Plaintiffs' admission that they received the cards and the agreements in 2003 means that they possessed the facts giving rise to their claims long before the filing of the Complaint. These claims therefore must be time-barred. II. ARGUMENT A. Plaintiffs Have Not Met Their Burden Of Showing That They Have Standing To Maintain This Action. Plaintiffs' Opposition does not advance their argument for standing. Plaintiffs have failed to take their alleged "injury" beyond the realm of hypothetical abstract rights and into the realm of injuries in fact, as required by law. Plaintiffs' own statement of the issue betrays their inability to demonstrate standing. Plaintiffs state: 1. In paying their annual (or other) fee for their American Express cards, Plaintiffs purchased or acquired the contractual right to mandatory arbitration of all claims they had against Defendants and the merchants from whom they purchased goods or services with their American Express cards; ... 4. Plaintiffs want to but cannot, as a matter of law, enforce the unenforceable and illegal arbitration provision in order to exercise the right to mandatory arbitration for which they paid; 5. Plaintiffs thus got less than that for which they paid--i.e., they did not get the full value of their contract--and, as a result, lost money (the pecuniary value of the contractual right to mandatory arbitration). Opposition, at 3 (citations omitted). This is the gist of Plaintiffs' argument for standing, and plainly it fails. The fact that Plaintiffs allegedly "want" to enforce the arbitration provision but supposedly cannot does not state an injury sufficiently concrete and measurable to pass the standing test. They do not say what,
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specifically, they do or do not want to arbitrate about. Nowhere in their Complaint or Opposition do Plaintiffs allege that they have attempted to arbitrate a dispute with American Express over their Agreements, or conversely that they were forced to arbitrate against their will or under unfair conditions. Plaintiffs' alleged injury, therefore, is purely hypothetical, since they have not shown that they have attempted to vindicate their alleged contractual right to arbitrate and were thwarted. Abstract injuries of this sort are not legally cognizable injuries. Plaintiffs' injury is purely hypothetical, based on Plaintiffs' conjectures about what might happen if they were to attempt to arbitrate, or if someone were to attempt to arbitrate against them. Courts have universally rejected similar arguments, recognizing that arbitration agreements may not be challenged outside the context of a concrete, specific and substantive dispute. See Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1019 (1984) (no standing where plaintiff "did not allege or establish that it had been injured by actual arbitration under the statute"); Bd. of Trade of the City of Chicago v. Commodity Futures Trading Cmm'n, 704 F.2d 929, 932-34 (7th Cir. 1983) (same); Tamplenizza v. Josephthal & Co., Inc., 32 F. Supp. 2d 702, 703, 704 (S.D.N.Y. 1999) (refusing to invalidate arbitration provision where no pending or imminent arbitral proceeding); Posern v. Prudential Secs., Inc., No. C-03-0507 SC, 2004 WL 771399, at *8 (N.D. Cal. Feb. 18, 2004) (same); Bowen v. First Family Fin. Servs., Inc., 233 F.3d 1331, 1341 (11th Cir. 2000) (same). Rather than address the above clear authorities, Plaintiffs stake their claim for standing solely on two cases, Lozano v. AT&T Wireless Services, Inc., Nos. 0556466, 05-56511, 2007 WL 2728758 (9th Cir. 2007), and Daghlian v. DeVry University, Inc., 461 F. Supp. 2d 1121 (C.D. Cal. 2006). Neither of these cases are of any help to them. Plaintiff in Lozano is a customer of AT&T who brought a class action based on AT&T's disclosures relating to its billing practices for cellular services. Lozano asserted various claims, including under the CLRA and UCL. Lozano based these
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claims on allegations that AT&T billed its customers for cellular telephone calls during a billing period other than the billing period in which the calls were made, an industry practice known as "out-of-cycle billing." Lozano contended that by doing this, AT&T assessed charges for cellular telephone calls that would not have been assessed if the calls had been billed during the billing period in which the calls were made. AT&T, according to Lozano, did not fully and adequately disclose its billing practices to its customers at the time they entered into contracts with AT&T. Plaintiffs latch on to two quotes from Lozano that, they claim, support their position. Neither does. The first is the following: Any class certified under subsection (a)(19) necessitates a class definition that includes individuals who sought to bring class actions in California, but were precluded from doing so because of the class action waiver in AWS's arbitration agreement, and suffered some resulting damage. See Wilens v. TD Waterhouse Group, Inc., 120 Cal. App. 4th 746, 15 Cal. Rptr. 3d 271, 276-77 (2003) (holding a court may not presume damages based on the mere insertion of an unconscionable clause in a contract). Lozano, 2007 WL 2728758, at *10. Plaintiffs desperately try to wring "the requisites for standing" out of this passage, which (as is facially obvious) deals not with standing, but rather with the issue of class certification of claims asserted under California Civil Code section 1770(a)(19). The Plaintiffs, in their eagerness to salvage an argument for standing, have confused class certification with standing. In any event, Lozano's citation to Wilens supports Defendants' position: absent pleading and proof of resulting pecuniary damages, merely inserting an allegedly unconscionable provision in a contract does not confer standing. The issue of standing did arise in Lozano in connection with Plaintiff's UCL claim, but Plaintiffs fail to address the Court's discussion of it. The court stated: The parties do not dispute that Lozano suffered pecuniary loss as a result of his alleged unawareness of AWS's [AT&T's] out-ofcycle billing practices. Shortly after contracting with AWS for cellular service, Lozano received an invoice stating that he had been charged fees as a result of out-of-cycle minutes from his previous invoice. The record also supports a finding that, during
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the course of his contract with AWS, AWS would occasionally charge Lozano an overage fee based on out-of-cycle billing. Lozano, 2007 WL 2728758, at *11 (emphasis supplied). The court also based its finding that Lozano had standing on the fact that "Lozano contracted for 400 free `anytime' minutes. Yet, due to out-cycle-billing, he reserved, and therefore lost, a certain number of those minutes each billing period to account for the late-billed roaming calls." Lozano, 2007 WL 2728758, at *12. Thus, the court found that Lozano, unlike the Plaintiffs here, had standing based on concrete, measurable, pecuniary injuries, namely, he was charged unnecessary fees by AT&T and he lost at least some of his 400 free "anytime" minutes, which had financial value because they needed to be replaced with purchased minutes. It is this finding as to standing that underlies the Lozano court's treatment of class certification. Thus, Plaintiffs ignore the discussion of standing in Lozano, and pin their hopes on the court's class definition under California Civil Code section 1770(a)(19). However, even facially, the passage the Plaintiffs quote does not help their argument because it specifies "individuals who sought to bring class actions in California" (emphasis added). Plaintiffs here fail to allege that they have actually sought arbitration under their Agreements, or that they had arbitration forced upon them on unfair terms. Therefore, they lack standing. Plaintiffs next cite the following in support of their claim for standing: "[W]e find that Lozano has properly stated an injury that he did not receive the full value of his contract ... and that this injury is redressable under the UCL." Lozano, 2007 WL 2728758 at *13. However, this is disingenuous. Plaintiffs neglect to quote the two immediately preceding sentences, which clearly show that the injury in question is both the actual charging of fees and also the loss of some of the 400 free anytime minutes to which Lozano was--again a concrete, measurable injury. The full passage reads as follows: Here, Lozano has a vested interest in 400 free anytime minutes. Due to out-of-cycle billing, however, Lozano found it necessary
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to reserve, and therefore lose, a certain number of those minutes each billing period. Accordingly, we find that Lozano has properly stated an injury that he did not receive the full value of his contract with AWS due to its alleged failure to disclose outof-cycle billing, and that this injury is redressable under the UCL. Lozano, 2007 WL 2728758, at *13. Plaintiffs also cite to Daghlian, but it likewise is distinguishable. In Daghlian, a student brought an action against a private university under the Private Postsecondary and Vocational Education Reform Act and other statutes, alleging that the university failed to inform him that academic units earned at the university probably would not transfer to other educational institutions; in other words, that what was purchased lacked economic value. Prior to enrolling, Daghlian met with a university recruiter, who represented that the university was an accredited institution where students were able to obtain degrees. Id. at 1125. The recruiter told Daghlian that unlike technical colleges that give students certificates that cannot be used toward advanced degrees, academic credits from the university were transferable to a wide variety of other academic institutions, in other words, that what was purchased had economic value. Id. Defendants argued that Daghlian's § 17500 and § 17200 claims must be dismissed because he had not established standing to prosecute the claims as required by Proposition 64. The court disagreed and found that the fact that the plaintiff incurred $40,000 in educational debt based on the recruiter's promises was sufficient to bestow standing on the plaintiff. Again, the plaintiff was actually out-of-pocket by reason of a specific disclosure violation. Daghlian does not support Plaintiffs' position here. Unlike Plaintiffs, Daghlian's injury was not conjectural: he was promised an accredited degree with transferable credits but actually received a degree of far less value. Daghlian's degree, for which he paid, was less valuable than it would have been but for the defendant's misrepresentations. This is very different from the case here where Plaintiffs' alleged "injury" is to some future right to arbitrate. Daghlian's injury springs from the education (or perceived education) he received at defendants'
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university and the concrete symbol of that education, i.e., the degree. Plaintiffs' "injury" here, by contrast, is to something hypothetical in the future that has no value until actually exercised. Therefore, Plaintiffs lack standing to maintain their causes of action under Article III of the Constitution, the UCL, the CLRA or for commonlaw fraud. B. Plaintiffs Fail To State A Claim Under the CLRA. In their Opposition, Plaintiffs simply seek to re-litigate Berry, a case that is the controlling decision here.1 In Berry, the plaintiff asserted a single cause of action for violation of the CLRA, contending that his credit card agreement contained an allegedly "unconscionable" arbitration agreement in violation of Civil Code section 1770(a)(19). Plaintiff contended that his credit card agreement was subject to the CLRA because a credit card supposedly constitutes a "good" or "service" as defined by Civil Code section 1761. Following the plain text of the statute, and relying on a close analysis of its legislative history, the Berry court flatly rejected plaintiff's argument, finding that an extension of credit is neither a "good" nor a "service" under the CLRA. The California Supreme Court denied review of the Court of Appeal's decision in Berry as well as multiple depublication requests.2 Plaintiffs attempt to circumvent the Berry decision by arguing that most uses of credit, charge, gift and dining cards do not involve an extension of credit.
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In footnote 4 of their Opposition, Plaintiffs, whose counsel here represented the Berry plaintiff, suggest that Berry was wrongly decided. However, under Ryman v. Sears, Roebuck and Co., No. 06-35630 (9th Cir., Oct. 12, 2007), this Court must follow Berry. In In Re Late Fee And Over-Limit Fee Litigation, No. C 07-0634 SBA (N.D. Cal. Nov. 16, 2007) (order granting motion to dismiss), the court dismissed the plaintiffs' CLRA claims, which were based on allegations that the defendant banks charged excessive late fees and/or over-limit fees, on the ground that credit-card accounts are not "goods or services" subject to the CLRA under Berry. The court noted that "[e]very federal court addressing the issue has followed [the Berry] precedent." Id. at 16. For the Court's convenience, a copy of the decision is attached hereto as Exhibit A.
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Plaintiffs do not address the Berry court's recognition that the California Legislature expressly excluded transactions for "money or credit" from coverage under the CLRA, and that post-Berry rulings read Berry (correctly) to exclude financial services generally from the CLRA. This case involves plastic payment cards, which substitute for "money" and which often provide "credit" as well, in the form of deferred repayment. Plaintiffs assert, in the case of credit cards, that "[a]lthough having an available credit feature, such cards do not necessarily implicate credit ...." Opposition, at 9. Stretching the boundaries of credulity even more, they allege that when one pays the annual fee for a charge card, for example, one purchases a "convenience service" that does not involve the extension of credit at all. Plaintiffs do not, however, say what specific "convenience service" they bargained for was not provided. Plaintiffs simply allege ­ without detail and in contradiction to the relevant card agreements ­ that "[n]o credit term or feature thus attaches to the charge card" (Opposition, at 8), and, "[t]his is particularly so with regard to the `charge' cards as well as the Dining Card and Gift Card. None of those even have a `credit' element" (Opposition, at 10-11). These allegations, which are legal conclusions only, cannot stand in light of Berry's clear holding that an extension of credit is neither a "good" nor a "service" under the CLRA. Plaintiffs' argument must therefore be rejected. Plaintiffs appear to construe "credit" very narrowly to mean any use of a credit card that incurs a monthly finance charge. See, e.g., Opposition at 7. Plaintiffs seem to allege that one is borrowing on credit only if one pays interest on the money borrowed. However, Plaintiffs fail to cite a single case that construes "credit" this narrowly under the CLRA. Their failure is explainable: There is none. An extension of credit is always implicated when one uses a plastic card in lieu of money, regardless of whether one pays one's balances in full at the end of the month or not. More significantly, use of any plastic card in lieu of cash involves a transaction for "money or credit" that Berry excludes from the CLRA.
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Plaintiffs fail to cite a single case in support of their claim that a "convenience service" is a "service" within the meaning of the CLRA. Again, there is none. Plaintiffs extensively quote from Hitz v. First Interstate Bank, 38 Cal. App. 4th 274, 286-87, 44 Cal. Rptr. 2d 890 (1995), particularly for the proposition that credit cards provide not only extensions of credit but also certain convenience features that constitute "services." However, Hitz is unavailing because it arose in the context of not the CLRA, but a different statute, California Civil Code section 1671, which governs only the enforceability of liquidated damages provisions. Section 1671 is irrelevant to this litigation. The other cases cited by Plaintiffs in support of their position are from the residential-mortgage context. Hernandez v. Hilltop Financial Mortg., Inc., No. C 067401 SI, 2007 WL 3101250, at *6 (N.D. Cal. October 22, 2007), is not on point. In Hernandez, "plaintiffs did not seek just a loan; they sought defendants' services in developing an acceptable refinancing plan by which they could remain in possession of their home. Thus, unlike in Berry, the situation in the present case involves more than the mere extension of a credit line." Id. And unlike the ephemeral "convenience service" Plaintiffs posit, "the circumstances here deal not just with the mortgage loan itself, but also with the services involved in developing, securing and maintaining plaintiffs' loan." Id. Similarly unhelpful to Plaintiffs is Jefferson v. Chase Home Finance LLC, 2007 WL 1302984 (N.D. Cal. May 3, 2007). In Jefferson, the court held that the CLRA applied to certain services connected with mortgages, specifically to a program under which debtors were able to prepay their mortgages without penalty. However, the claim under the CLRA was not aimed at the extension of credit itself. Rather, it was directed at the defendant's prepaid mortgage practices, a financial service provided to debtors. (Jefferson also predated the denial of review in Berry.) Finally, Plaintiffs cite In re Ameriquest Mortgage Lending Practices Litigation, No. 05-CV-7097, 2007 WL 1202544, *6 (N.D. Ill. April 23, 2007), for the general proposition that "it is not inconceivable that . . .
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plaintiffs could prove the existence of tangential `services' associated with their residential mortgages and establish that these transactions were covered by the CLRA." Indeed, this is not inconceivable at all, since Jefferson and Hernandez, notably also residential mortgage cases, similarly held that the CLRA may apply where "the circumstances ... deal not just with the mortgage loan itself, but also with the services involved in developing, securing and maintaining plaintiffs' loan." Hernandez, 2007 WL 3101250, at *6. But the services at issue in these cases are a far cry from a "convenience service." Plaintiffs also fail to address cases in the mortgage and real-estate context where the court found the CLRA inapplicable. For example, in Berryman v. Merit Property Management, Inc., 152 Cal. App. 4th 1544 (2007), homeowners filed a putative class and representative action against the managing agent for a homeowners association, alleging violations of the Davis-Stirling Common Interest Development Act, the UCL and CLRA, and other claims. The homeowners' claims were based on allegations that the agent wrongfully charged homeowners document and transfer fees upon the purchase or sale of homes. The California Court of Appeal held that the homeowners failed to state a claim against the agent for violations of the CLRA. Also, in McKell v. Washington Mutual, Inc., 142 Cal. App. 4th 1457 (2006), the plaintiffs claimed that the defendants overcharged them "for underwriting, tax services, and wire transfer fees in conjunction with home loans." Id. at 1465. Finding that the defendants' "actions were undertaken in transactions resulting in the sale of real property," rather than "the sale or lease of goods or services," the court held the CLRA inapplicable to the facts of the plaintiffs' case. Id. at 1488. Berry, as well as many other cases cited in the Motion to Dismiss, simply develop the basic principle recognized in Civil Services Employees Ins. Co. v. Superior Court, 22 Cal. 3d 362, 376 (1978), that the CLRA only regulates those things that are "technically" goods or services, as traditionally understood. The
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payment cards at issue indisputably involve transactions for "money or credit," as traditionally understood, and therefore are excluded from the CLRA. Plaintiffs' CLRA claim should be dismissed without leave to amend. C. The Complaint Does Not Meet The Specificity Requirements Of Federal Rule of Civil Procedure 9(b). A plaintiff who alleges fraud must meet the heightened pleading requirements of Federal Rule of Civil Procedure 9(b), which provides that, "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." To avoid dismissal for inadequacy under Rule 9(b), Plaintiffs must state the "time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation." Walton v. Mead, No. C 03-4921 CRB, 2004 WL 2415037, *7 (N.D. Cal. October 28, 2004) (citing Edwards v. Marin Park Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)). Plaintiffs assert in their Complaint that American Express made misrepresentations to Plaintiffs and other cardmembers concerning the terms contained in American Express's Agreements and that these representations were made not only in the Agreements themselves but also in direct communications between Plaintiffs and American Express. (Compl. ¶ 104.) However, neither in their Complaint nor in the Opposition do Plaintiffs describe the alleged (mis-) representations, much less state the "time, place, and specific content of the false representations" upon which Plaintiffs relied at the time they obtained their credit cards. The "misrepresentations" Plaintiffs allege are non-specific, and therefore noncompliant with Rule 9(b). The fraud claim should be dismissed. D. Plaintiffs' CLRA And Fraud Claims Against American Express Centurion Bank Are Barred By The Statute of Limitations. Plaintiffs' CLRA and fraud claims against Centurion Bank also are barred by the three-year statutes of limitations which, if somehow there is standing to assert these claims, would have accrued when Plaintiff Lloyd obtained his American
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Express card and card agreement in 2003, as Plaintiffs admit both in the Complaint and Opposition. See Opposition at 18, Compl. ¶ 39. In 2003, Plaintiffs possessed all the relevant facts giving rise to their CLRA and fraud claims and yet, for nearly four years, chose to do nothing. Their claims, thus, are time-barred. Plaintiffs' attempts at extricating themselves from this bind are unavailing. Plaintiffs claim that Defendants periodically amended the Agreement and thus perhaps accrual started later. Not so. Plaintiffs allege in paragraph 63 of the Complaint that "[t]he arbitration provision in effect in 2003-05 relative to Plaintiff Lloyd (and those card holders whom he seeks to represent) was similar [to the arbitration provision contained in the 2006 version of the agreement between Plaintiff Lee and American Express]." (Compl. ¶¶ 62-63.) Thus, the amendments to Plaintiff Lloyd's 2003 agreement fail to explain Plaintiffs' delay in pressing their claims in a timely fashion. Next, although Plaintiffs correctly identify the rule of accrual, this rule clearly shows why Plaintiffs' claims are barred. Essentially, the rule is the same for both CLRA and fraud claims: the time starts to run from the discovery by the aggrieved party of the facts giving rise to the cause of action. See Mass. Mut. Life Ins. Co. v. Super. Ct., 97 Cal. App. 4th 1282, 1295 (2002); Television Adventure Films Corp. v. KCOP Television, Inc., 249 Cal. App. 2d 268, 279 (1967). Plaintiffs contend that the "[injury] occurs at the time each payment of the annual fee was made ... and/or at the time of the 2005 amendment to the arbitration provision and cardmember agreement ...." (Compl. ¶19.) Plaintiffs further allege that the "delayed discovery" rule applies, with each payment of the annual fee triggering a new limitations period. (Opposition at 19.) In support of their position, Plaintiffs quote the following from Hogar v. Community Development Commission, 110 Cal. App. 4th 1288, 1295 (2003): "[w]hen an obligation or liability arises on a recurring basis, a cause of action accrues each time a wrongful act occurs, triggering a new limitations period."

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But this is not a case of recurring wrongs. Plaintiffs allege only one supposed wrong: the inclusion of certain terms dealing with arbitration and choice of law in the original 2003 agreement. The subsequent amendments to the agreement, by Plaintiffs own admission, did not materially change the agreement and thus cannot constitute a new injury. (See Compl. ¶¶ 62-63.) The fact that Plaintiffs made several annual payments has no bearing whatsoever on when their causes of action accrued. Those causes of action accrued in 2003 ­ when, by their own admission, Plaintiffs received their credit card and agreement. The alleged wrongs in the credit agreement do not sprout anew every time Plaintiffs pay their fees. See, e.g., State ex rel. Metz v. CCC Information Services, Inc., 149 Cal. App. 4th 402, 418 (2007); Flintkote Co. v. General Acc. Assur. Co. of Canada, 480 F. Supp. 2d 1167, 1178 (N.D. Cal. 2007). Therefore, Plaintiffs' CLRA and fraud claims against Centurion Bank are time-barred and should be dismissed without leave to amend. III. CONCLUSION

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For the foregoing reasons, American Express respectfully requests that this Court grant the Motion and dismiss the Complaint in its entirety. Dated: November 16, 2007 Respectfully submitted, STROOCK & STROOCK & LAVAN LLP JULIA B. STRICKLAND STEPHEN J. NEWMAN By: s/Stephen J. Newman Stephen J. Newman Attorneys for Defendants AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., AMERICAN EXPRESS CENTURION BANK and AMERICAN EXPRESS BANK, FSB

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